Rick Kleckner Corporation recorded a finance lease at $340,000 on January 1, 201

Question

Rick Kleckner Corporation recorded a finance lease at $340,000 on January 1, 2014. The interest rate is 11%. Kleckner Corporation made the first lease payment of $65,003 on January 1, 2014. The lease requires eight annual payments. The equipment has a useful life of 7 years with no residual value. Assume that at December 31, 2014, Kleckner made an adjusting entry to accrue interest expense of $30,250 on the lease. Prepare Kleckner’s January 1, 2015, journal entry to record the second lease payment of $65,003. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.)

Date

Account Titles and Explanation

Debit

Credit

Date

Account Titles and Explanation

Debit

Credit

Jan. 1, 2014

Explanation / Answer

312397-30639.33

year Lease at beginning Interest payment principal Lease at end 1 340,000 37400   (340000*.11) 65003 27603    (65003-37400) 312397   (340000-27603) 2 312397 34363.67    (312397*.11) 65003 30639.33   (65003-34363.67)

312397-30639.33

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